Here’s the dirty secret of private college “financing” and how it really works. Private colleges first set a ridiculously high list price. Here’s my alma mater Lafayette College as an example. Their all-in cost per year now is $57,000 (food not included, sorry).
Here’s the secret: most everyone doesn’t pay nearly that much. They get “financial aid.” The financial aid office studies each family’s finances, tax returns, and background and then uses a formula to determine financial aid and grants. In other words, they look to see the maximum that a family can afford and charge that amount.
To repeat: colleges study how much you can possibly afford and then set the price for you. This is like a car dealer looking at your tax return and deciding how much you should pay for a car. That’s wrong.
Of course, the department that looks at financial aid is a cost center for the school. Colleges have to hire financial aid assistants, governmental compliance managers, debt collectors, managers to manage the managers, and so on. Therefore, tuition has to be higher to pay for more staff to handle the amount of loans, aid, and financing that must be arranged. It’s a vicious cycle.
For most colleges, the price that you pay is not only for the cost of your classes. You pay for everything else that the college has to offer, even if you do not use all of their services, such as their sports teams, gyms, luxury dormitories, etc. The rising cost of college is also affected by administrators with bloated salaries and inefficient spending, but not teacher salaries. For example, 42 college presidents made over $1 million in compensation in 2012. Additionally, many universities are having to spend millions on trying to attract more students to apply because they have to compete for students on a global scale.
The result of this process is that the parents and students are forced to take out student loans that will take decades to pay off. We know tons of people who are saddled with student debt in their late 30s and early 40s.
Young people graduate with tons of debt and no guarantee of a future. Is that the way education should work? We think that’s garbage.
People ask if they can use government grants, conventional student loans, GI Bills, and other public or private financing sources. We say no because we don’t want to punish our students because the higher education system is fundamentally broken. If we join other educational institutions exploiting students and government funding, we’ll slowly become the bureaucratic mess they have become. Instead, we want to spend our time working to prepare our students.
We think that higher-education needs a complete rethinking. Education should be tied to a future, not to a slip of paper. If an educational program wins while students lose, that is a failed institution and system.
With Codeup, you get what you pay for. We put our money where our mouth is. We do not ask for government handouts. We do not saddle students with any debt until we get them a future. You win, we win. You lose, we lose.
Students first, always, and that is how it should be.